Coca-Cola Plans to Further Slash Expenses

CEO Cites Need to Improve Consumer Marketing, Commercial Strategies

Published on October 21, 2014.

Credit: Turner Duckworth

Coca-Cola is struggling with sluggish international growth and mounting concerns over obesity and artificial sweeteners.

After criticism that he wasn't responding quickly enough to the slump, Chief Executive Officer Muhtar Kent vowed today to reduce expenses by $3 billion a year by 2019. He had already pledged in February to trim $1 billion in costs by 2016.

Mr. Kent has highlighted the importance of investing in marketing, noting that the company will work to "improve the quality of our marketing and scale our global investments through a networking model" in order to improve growth for the Coca-Cola trademark, Fanta and Sprite. Mr. Kent also said the company is working to drive discipline and efficiency in its direct marketing investments.

"There's no question that we need to improve our execution in many markets, especially our consumer marketing and commercial strategies," Mr. Kent said.

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Shareholders may still be waiting for more dramatic action, especially since it's unclear how much of those cost savings will wind up in investors' pockets, said Ali Dibadj, a New York- based analyst at Sanford C. Bernstein & Co.

"I wouldn't call this capitulation by management as they continue to move too slowly for our tastes," said Mr. Dibadj. The soda maker hasn't indicated how much of the $3 billion will be returned to shareholders, rather than "squandered" on marketing and advertising, he said.

Coca-Cola's woes have overshadowed a U.S. market-share gain from the company's "Share a Coke" program, which replaced its logo on bottles and cans with common names and phrases.

Sales fell to $11.98 billion in the quarter from $12 billion a year earlier, the company said. Sales volume declined 1% in North America last quarter, while global volume climbed 1%. Third-quarter net income fell 14% to $2.1 billion from $2.45 billion, a year earlier.